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  • Writer's pictureJonathan Baner

Navigating the Impact of SB 5173 on Debt Collection and Garnishment in Washington - 2023's new law

Washington recently passed a new law, SB 5173, with far-reaching implications for creditors. The law's principal impact concerns bankruptcy and personal property exemptions, but the focus of this article is on its impacts for garnishments. The generally effective date is July 23, 2023.

SB 5173 had a primary goal of clarifying that a community of married or domestic partners (herein we refer to both groups simply as married) are to receive, effectively, double the exempt amount. That is instead of $500 exemption for general debts, regardless of marital status, the marital community can now claim $1,000 as exempt.

The legislature has changed the mandatory form used for writs of garnishment directed to banks, the notice of garnishment and your rights, and the exemption claim form. The changes to the form reflect the doubling of the exemption amounts for couples and language that doubles the automatic bank exemptions that banks must comply with when processing writs of garnishment.

Reminder regarding automatic bank exemptions

Writs of garnishment directed to a bank have automatic exemptions that the bank itself honors. The debtor still receives a claim form to claim any exemptions that are not automatic. Generally, such claims are, and likely will remain rare as they require action from the debtor.

The maximum exempt amount for bank account, stocks, bonds, and other securities totals:

General debt

$500 maximum exemption

$500 automatically protected

Private student loan

$2,500 maximum exemption

$1,000 automatically protected

Consumer debt

$2,000 maximum exemption

$1,000 automatically protected

The change to the exemptions:

The above exemptions may be claimed by both spouses, which effectively doubles the exemption and automatic protection amount and removes a potential marriage penalty. Therefore, for married couples the amounts are:

General debt (married or domestic partners)

$1000 maximum exemption

$1000 automatically protected

Private student loan (married or domestic partners)

$5,000 maximum exemption

$2,000 automatically protected

Consumer debt (married or domestic partners)

$4,000 maximum exemption

$2,000 automatically protected

Language changes

Writs of garnishment to banks now must contain the language directed to the bank that reflecting the above: if they "have documentation that the funds in the account are community property . . . and if the total of the amounts held in all of the combined accounts of the married person . . . is less than or equal to" the following amounts:

Private student loan and consumer debts: $1,000 for an individual, or $2,000 for a marital community or domestic partnership.

All other debts: $500 for an individual, or $1,000 for a marital community or domestic partnership.

Then the bank must release those funds to the debtor(s) such that they receive back at least the minimal amount.

The exemption claim form has been redrafted to include a declaration under penalty of perjury for claiming the new exemptions. The statutory notice of garnishment and of rights has also been modified to include the changes. The new forms are typically made available on the courts website, but may be delayed past the effective date of the statute.

Putting it all together and final thoughts

These new exemption amounts are meant to offer more financial security for couples, but in a sense merely eliminates a marriage penalty previously existed. The increased automatic exemption amount for general debts ($500 to $1,000) is of little consequence in most circumstances. Creditors should be on the lookout for updating their garnishment forms prior to the effective date (no later than July 23, 2023).

As always if you are in need of garnishment services then please contact us, The Garnishment Gurus, so we can help you collect what you are owed.

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